The trucking industry across the UK is facing record-high fuel prices, despite the decline in oil prices. Recently, the cost of oil has fallen to less than $100, from the previous $130 prices. With the global supply issues, the impact of Russia invading Ukraine, and the overall uncertainty within the market. This led to the forecourt prices continuously fluctuating almost daily, throughout the UK.
With the increase in fuel among other increasing costs such as energy, many HGV and truck drivers are now struggling to fuel their vehicles. As a result, various businesses have warned that this increased pressure, could force them to increase the prices of goods.
The Road Haulage Association (RHA), managing director Rod McKenzie, termed the cost increase of fuel as “dramatic”. He commented “If hauliers have to pay more for their fuel, they inevitably have to charge customers more. I suspect this will mean prices going up on everything that is delivered by a truck, which is frankly 97% of everything that we get in Britain.”
Existing Price Of Fuel
British automotive company the RAC, closely monitors both wholesale and retail fuel prices daily using their Fuel Watch initiative. Retailers include Tesco, Sainsbury’s, Asda, and Morrisons. RAC through their initiative then urges these retailers to pass on any cost savings to drivers. As a national average, petrol is currently 167.64p per litre and diesel is 180.88ppl.
How Have Fuel Prices Changed?
At the peak of the coronavirus pandemic, the UK went into full lockdown, enforcing only key workers to travel. At this point fuels fell to around £1 a litre due to lack of demand. However, since the UK has moved towards normality and people are able to visit loved ones again, prices have increased. From November 2021, new records have been set almost daily. March 2022. Was a new record high according to RAC data with petrol reaching 163.28p and diesel at 177.29p. At which point a cut in fuel duty was announced.
Chancellor Rishi Sunak told MPs “Today I can announce that for only the second time in 20 years, fuel duty will be cut. Not by one, not even by two, but by 5p per litre. The biggest cut to all fuel duty rates – ever. While some have called for the cut to last until August, I have decided it will be in place until March next year – a full 12 months.”
Why Have Fuel Prices Risen?
The price of oil largely determines the price of fuel. RAC fuel spokesman Simon Williams commented, “Having taken production down when demand fell due to the pandemic, the oil producers are now struggling to get production back up to the required levels to meet demand.” However, there is no single body that sets the price of fuel within the UK. It is up to retailers to make that decision based on the level of margin they require.
Additionally, Russia is the world’s second top producer of crude oil after Saudi Arabia, and supplies about a third of Europe’s needs. Due to their invasion of Ukraine, the global market has become unstable amid fears of a reduction in Russian supplies.
Impact Of Fuel Prices On The Trucking Industry
The pressure within the trucking and logistics industry is already high. With a shortage of skilled drivers, covid restrictions, and additional paperwork at the borders due to Brexit. However, the RHA has now estimated that the cost of running a truck has risen by around 40% in the past 12 months. Rod McKenzie, managing director at RHA comments “Recent rises in fuel costs have the potential to wipe out profit”.
Logistics UK has created a Logistics Performance Tracker to monitor the ongoing impact of the global pandemic on the logistics sector. In May 2022, they reported that 71% of UK logistics companies reported an escalation in the cost of transporting goods. This was comparative to 2021, Q4. Participants stated that this was due to the cost of fuel and other global supply chain pressures. 40% of respondents reported their costs had climbed by 25% or more.
Deputy Director at Logistics UK, Sarah Watkins, commented “The cost to transport goods is surging at an unprecedented rate amid significant increases in the cost of fuel. The sheer numbers of logistics companies reporting increases in both freight rates and the costs to move goods suggest rising prices are deeply embedded and are unlikely to subside in the coming weeks. The sector is particularly reliant on diesel, the cost of which is likely to remain elevated even as the cost of other fuels subside. More than a third of respondents to our survey say orders are declining, likely as a result of both rising freight costs and as consumers cut back amid a broader cost of living squeeze.”
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